Chapter 10

True / False Questions

1. A company's organizational structure helps to determine where formal power and authority will
be located within the organization.

TRUE

As stated directly in the chapter.

AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 10-01 Explain why the design of organizational structure is important to international companies.
Topic Area: What is organizational design, and why is it important for international companies?

2. Organizational change refers to the way that an organization formally arranges its various
domestic and international units and activities and the relationships among these various
organizational components.

FALSE

Organizational design refers to the way that an organization formally arranges its various
domestic and international units and activities and the relationships among these various
organizational components.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-01 Explain why the design of organizational structure is important to international companies.
Topic Area: What is organizational design, and why is it important for international companies?

3. Organizational structure deals with how an international business should be organized in order
to ensure that its worldwide business activities are integrated.

TRUE

As stated directly in the chapter.

AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
 Learning Objective: 10-01 Explain why the design of organizational structure is important to international companies.
Topic Area: What is organizational design, and why is it important for international companies?

4. An evolving structure for an international organization over time is normal, as the company's
involvement in foreign markets increases over time.

TRUE

As stated directly in the chapter.

AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 10-01 Explain why the design of organizational structure is important to international companies.
Topic Area: What is organizational design, and why is it important for international companies?

5. In designing an international organization, it is essential that the structures and systems being
implemented are consistent not merely with each other but also with the strategy the company
and its competitors are using.

FALSE

In designing an international organization, it is essential that the structures and systems being
implemented are not merely consistent with each other but also consistent with the
environmental context in which the organization is operating and the strategy the company is
using for competing in this international environment.
Refer To: Figure 10.1, The relationship among international environment, competitive strategy,
and organizational structure

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-01 Explain why the design of organizational structure is important to international companies.
Topic Area: What is organizational design, and why is it important for international companies?

6. Changes in an international company's strategy may require changes in the organization's

design, but not the reverse.

FALSE

Changes in an international company's strategy may require changes in the organization's

design, but the reverse is also true.

AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 10-01 Explain why the design of organizational structure is important to international companies.
Topic Area: What is organizational design, and why is it important for international companies?
7. Two of the concerns that management faces in designing the organizational structure for an
international company are (1) finding the most effective way to take advantage of geographic
differences and (2) coordinating the activities of departments to enable the firm to meet its
overall objectives.

FALSE

Two of the concerns that management faces in designing the organizational structure for an
international company are (1) finding the most effective way to departmentalize to take
advantage of the efficiencies gained from specialization of labor and (2) coordinating the
activities of those departments to enable the firm to meet its overall objectives.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-02 Discuss the organizational dimensions that must be considered when selecting organizational structures.
Topic Area: What is organizational design, and why is it important for international companies?

8. A company's international operating environment, both currently and as it is expected to be in

the future, is the primary determinant of its organizational structure.

FALSE

In designing an international organization, it is essential that the structures and systems being
implemented are not merely consistent with each other but also consistent with the
environmental context in which the organization is operating and the strategy the company is
using for competing in this international environment.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-02 Discuss the organizational dimensions that must be considered when selecting organizational structures.
Topic Area: What is organizational design, and why is it important for international companies?

9. The international division is a division in the organization that is responsible for all non-home-
country activities and reports to the domestic division.

FALSE

The international division is a division in the organization that is at the same level as the
domestic division and is responsible for all non-home-country activities.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?
10. Most companies establish worldwide organizations based on product, region, function, or
customer classes.

TRUE

As stated in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

11. The initial choice of organizational structure after discarding the international division is usually
a hybrid based on product and market factors.

FALSE

The initial choice of organizational structure after discarding the international division is usually
one based on either global product or global geographic factors.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

12. The product global corporate form eliminates the duplication of product and area specialists.

FALSE

While the product global corporate form usually eliminates the duplication of product experts
common in a company with an international division, it creates a duplication of area experts.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?
13. The type of structure that simplifies the task of directing worldwide operations because every
country in the world is clearly under the control of someone who is in contact with
headquarters is global product.

FALSE

The type of structure that simplifies the task of directing worldwide operations because every
country in the world is clearly under the control of someone who is in contact with
headquarters is geographic region.

AACSB: Analytic
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

14. The regionalized organization appears to be popular with companies that manufacture
products with a rather low technological content.

TRUE

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

15. Both multinational and global companies use regionalized organizations.

TRUE

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?
16. Production coordination poses difficult problems in many regionalized organizations, which
has led many companies to assign many specialized product managers who have line
authority.

FALSE

Production coordination across regions presents difficult problems, as does global product
planning. To alleviate these problems, managements often place specialized product
managers on the headquarters staff. Although these managers have no line authority, they do
provide input to corporate decisions concerning products.

AACSB: Analytic
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

17. The disadvantage of an organization divided into geographic regions is that each region must
have its own product and functional specialists.

TRUE

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

18. Few international companies are organized by function at the top level.

TRUE

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?
19. Global firms that organize by function at the top level have functional managers that report
directly to the area heads.

FALSE

Global firms that organize by function at the top level have functional managers that report
directly to the CEO.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

20. A structure organized by more than one dimension at the top level is a matrix organization.

FALSE

A structure organized by more than one dimension at the top level is a hybrid organization.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

21. Hybrid organizations are often the result of a regionally organized company having introduced
a new and different product from what the regionally organized form is accustomed to
handling.

TRUE

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?
22. A matrix organization involves two or more dimensions, such as area and product, in which
managers are at the same level but do not have overlapping responsibilities.

FALSE

A matrix organization involves two or more dimensions, such as area and product, in which
managers are at the same level and their responsibilities will overlap.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

23. In a typical matrix organization based on area and product dimensions, country managers will
be responsible to both the area managers and the product line managers.

TRUE

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

24. An organization in which top-level divisions are required to heed input from a staff composed
of experts of another organizational dimension in an attempt to avoid the double-reporting
difficulty of a matrix organization but still mesh two or more dimensions is called a hybrid
organization.

FALSE

An organization in which top-level divisions are required to heed input from a staff composed
of experts of another organizational dimension in an attempt to avoid the double-reporting
difficulty of a matrix organization but still mesh two or more dimensions is called a matrix
overlay.

AACSB: Analytic
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?
25. The matrix overlay organizational form attempts to eliminate some of the problems of the
matrix organization.

TRUE

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

26. A business entity with a clearly defined market, specific competitors, the ability to carry out its
business mission, and a size appropriate for control by a single manager is a strategic
operating unit.

FALSE

A business entity with a clearly defined market, specific competitors, the ability to carry out its
business mission, and a size appropriate for control by a single manager is a strategic
business unit.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

27. Strategic business units are an organizational form in which geographic divisions have been
defined as though they were distinct, independent businesses.

FALSE

Strategic business units are an organizational form in which product divisions have been
defined as though they were distinct, independent businesses.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?
28. The rapidly changing business environment caused by increased global competition, customer
preference for custom-made rather than mass-produced products, and faster technological
change is pressuring companies to make greater use of global product structures.

FALSE

The rapidly changing business environment caused by increased global competition, customer
preference for custom-made rather than mass-produced products, and faster technological
change is pressuring companies to make greater use of changes in organizational forms, or
reengineering.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

29. According to the text, an organization that coordinates economic activity to deliver value to
customers using resources outside its traditional boundaries is an integrated corporation.

FALSE

According to the text, an organization that coordinates economic activity to deliver value to
customers using resources outside its traditional boundaries is a virtual corporation.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

30. A virtual corporation is also called a network organization.

TRUE

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?
31. Advantages of the virtual corporation concept include that it allows a company to build
competence from the ground up and to increase management's control over the corporation's
activities.

FALSE

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

32. A form of organization characterized by lateral decision processes, horizontal networks, and a
strong corporatewide business philosophy is a horizontal corporation.

TRUE

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

33. The horizontal organization has been characterized as antiorganization because its designers
try to remove the constraints imposed by the conventional organizational structure.

TRUE

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?
34. As the 21st century evolves, it is expected that managers will make greater use of the dynamic
network structure to integrate smaller units into an operation better coordinated by a large
central headquarters organization.

FALSE

As the 21st century evolves, it is expected that managers will make greater use of the dynamic
network structure that breaks down the major functions of the firm into smaller companies
coordinated by a small-size central headquarters organization.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

35. According to the text, every successful company uses controls to put its plans into effect,
evaluate, correct, and reward.

TRUE

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control

36. All decisions are made either at the IC headquarters or at the subsidiary level.

FALSE

All decisions are made either at the IC headquarters, at the subsidiary level, or cooperatively.

AACSB: Analytic
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control
37. Companies controlled by other companies through ownership of enough voting stock to elect
majorities on the board of directors are called subsidiaries or affiliates.

TRUE

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control

38. In a firm without a global product policy, the preference of the operations management people
in the home office has always been to localize the product or at least the production process in
as many overseas plants as possible.

FALSE

In a firm without a global product policy, the preference of the operations management people
in the home office has always been to standardize the product or at least the production
process in as many overseas plants as possible.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control

39. Moving executives around an IC system can increase confidence and mutual reliance.

TRUE

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control
40. The more familiar, or the more similar, conditions in the host country are perceived to be, the
more likely headquarters is to rely on subsidiary management.

FALSE

The more familiar, or the more similar, conditions in the host country are perceived to be, the
less likely headquarters is to rely on subsidiary management.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control

41. In larger, older organizations more decisions are made at the subsidiaries.

FALSE

In larger, older organizations more decisions are made at the headquarters and fewer are
delegated to subsidiaries.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control

42. The increasing pace of change and intensity of competition in many markets of the world, as
well as continued differences across many markets, are causing even large experienced
companies to delegate at least some decision-making authority to subsidiary managers.

TRUE

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control
43. Subsidiary detriment occurs when a small loss for a subsidiary results in a greater gain for the
total IC.

TRUE

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control

44. Decisions that work to the detriment of the subsidiary may be beneficial to the enterprise.

TRUE

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control

45. In some cases, an international company legally can keep more profit after taxes by allocating
work and prices.

TRUE

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control

46. Pricing that is established for transactions between members of the enterprise is called
transfer pricing.

TRUE

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
 Topic Area: Control

47. Subsidiary management morale is one element in determining where decisions would be
made.

TRUE

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control

48. All the reasons for making decisions at IC headquarters, at 100 percent-owned subsidiary
headquarters, or cooperatively do not apply in joint venture situations.

FALSE

All the reasons for making decisions at IC headquarters, at 100 percent-owned subsidiary
headquarters, or cooperatively apply equally in joint venture situations.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Discuss how an international company can maintain control of a joint venture or of a company in which the intenrational
company owns less than 50 percent of the voting stock.
Topic Area: Control

49. With less than 50 percent of the voting stock, or even with no voting stock, an IC can still have
control.

TRUE

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Discuss how an international company can maintain control of a joint venture or of a company in which the intenrational
company owns less than 50 percent of the voting stock.
Topic Area: Control
50. For controls to be effective, all operating units of an IC must provide headquarters with timely,
accurate, and complete reports, including those dealing with financial, technological, market
opportunity, and political and economic information.

TRUE

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-06 List the types of information an international company needs to have reported to it by its units around the world.
Topic Area: Control

Multiple Choice Questions

51. To facilitate Kraft's goal of enhancing growth prospects within developing-country markets, the
company:

A. moved an increasing proportion of decisions to the company's Illinois headquarters.

B. gave full profit-and-loss accountability to the business units.
C. expanded core product categories into large developing countries.
D. all of the above.
E. two of A, B, and C.

B and C are correct, so E is the appropriate answer. An increasing proportion of decisions

were moved away from, not to, the company's headquarters and into the company's operating
units.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-01 Explain why the design of organizational structure is important to international companies.
Topic Area: What is organizational design, and why is it important for international companies?
52. Organizational structure:

A. refers to the way that an organization formally arranges its various domestic and
international units and activities and the relationships among these organizational
components.
B. helps to determine where formal power and authority will be located within the organization.
C. is primarily created and evolved by senior management.
D. all of the above.
E. two of A, B, and C.

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-01 Explain why the design of organizational structure is important to international companies.
Topic Area: What is organizational design, and why is it important for international companies?

53. Organizational design:

A. is a process that deals with how an international business should be organized in order to
ensure that its business activities are integrated globally.
B. must consider the size of an organization and the complexity of its business operations.
C. must be able to evolve over time in order to enable the organization to respond to change.
D. all of the above
E. two of A, B, and C.

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-01 Explain why the design of organizational structure is important to international companies.
Topic Area: What is organizational design, and why is it important for international companies?
54. In designing the organizational structure, management knows two concerns, __________ and
__________, run counter to each other.

A. finding the most effective way to departmentalize; coordinating activities

B. earning profits; paying taxes
C. hiring employees; reducing labor costs
D. sales growth; research and design expenditures
E. none of the above.

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-02 Discuss the organizational dimensions that must be considered when selecting organizational structures.
Topic Area: What is organizational design, and why is it important for international companies?

55. The primary dimensions that need to be considered when designing the structure of an
international company are:

A. product and technical expertise, geographic expertise, and functional expertise.

B. product and technical expertise, customer expertise, and functional expertise.
C. geographic expertise, functional expertise, and customer expertise.
D. all of the above
E. two of A, B, and C.

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-02 Discuss the organizational dimensions that must be considered when selecting organizational structures.
Topic Area: What is organizational design, and why is it important for international companies?
56. Regarding the way international companies are structured and integrated:

A. no single structure is best for all companies and contexts.

B. managers must consider the nature of their company's international operating environment
and their competitors' strategies when deciding when and how to modify the company's
organizational structure.
C. gains from increased specialization will be nullified by increased costs of coordination,
requiring managers to choose between the two.
D. all of the above
E. two of A, B, and C.

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-02 Discuss the organizational dimensions that must be considered when selecting organizational structures.
Topic Area: What is organizational design, and why is it important for international companies?

57. Regarding the structure of international companies:

A. managers have to consider the nature of their company's international operating

environment, both currently and how it is expected to change in the future.
B. managers have to consider the nature of their competitors' international strategies, both
currently and how they are expected to change in the future.
C. gains from increased specialization of labor may at times be nullified by the increased cost
of coordination.
D. all of the above.
E. two of A, B, and C.

A and C are correct, so E is the appropriate choice. Competitors' international strategies are
not explicitly mentioned in the text as being a key consideration in developing an
organization's strategy.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-02 Discuss the organizational dimensions that must be considered when selecting organizational structures.
Topic Area: What is organizational design, and why is it important for international companies?
58. Global companies:

A. none of the following is correct.

B. do not have international divisions.
C. are large companies with numerous overseas manufacturing facilities.
D. are organized on the basis of products and do not have other organizing dimensions in a
pure organization.

As stated in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

59. According to the text, which of the following dimensions provide(s) the basis for organizational
subdivisions at the secondary, tertiary, and still lower levels?

A. Two of B, C, and D
B. Process
C. Customer class
D. Nature of competition
E. All of B, C, and D

Both B and C are correct, so A is the appropriate answer.

AACSB: Analytic
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?
60. According to the text, which of the following dimensions provide(s) the basis for organizational
subdivisions at the secondary, tertiary, and still lower levels?

A. Two of B, C, and D
B. National subsidiary
C. Domestic or international
D. Function
E. All of B, C, and D

As stated in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

61. Companies that adopted the global organizational form felt that this organization would:

A. permit them to obtain cheaper labor.

B. be more capable of developing strategies to confront new global competition.
C. enable them to get lower interest rates to finance expansion.
D. all of the above.
E. two of A, B, and C.

As stated in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?
62. As their overseas operations have increased in importance, companies have felt the need to:

A. eliminate the international division.

B. establish worldwide organizations based on product, function, region, or customer classes
at the top level.
C. lower production costs by setting up in-bond plants.
D. two of the above.
E. all of A, B, and C.

A and B are correct, so D is the appropriate response.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

63. The international structural stages model suggests that a typical evolutional path for an
international company's structure would be:

A. from international division to geographic area division to worldwide product division.

B. from international division to worldwide product division to geographic area division.
C. from geographic area division to worldwide product division to global matrix.
D. from functional division to horizontal company to virtual corporation.
E. from international division to worldwide product division to global matrix.

As stated in the text.

Refer To: Figure 10.3, The international structural stages model

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?
64. The use of a global product organization structure:

A. frequently represents a return to pre-export department times.

B. has domestic product divisions responsible for the worldwide operations such as marketing
and production of products under their control.
C. helps to avoid duplication of area experts.
D. all of the above.
E. two of A, B, and C.

A and B are correct, so E is the appropriate response.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

65. The regionalized organization seems to be popular with companies that:

A. operate in many diverse foreign regions.

B. favor licensing as a form of market entry.
C. manufacture products with a low technological content requiring strong marketing ability.
D. manufacture products incorporating high technology in industrialized regions.
E. two of the above.

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?
66. The regionalized organization:

A. has the advantage that it avoids duplication of product and functional specialists.
B. seems to be popular with companies that have diverse products, each with different product
requirements, competitive environments, and political risks.
C. often encounters problems with global product planning.
D. two of the above.
E. all of A, B, and C.

B and C are correct, so D is the appropriate response.

AACSB: Analytic
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

67. Disadvantages of the regionalized organization structure include:

A. the increased complexity of directing worldwide operations.

B. its inappropriateness for use in global companies.
C. its duplication of area and product specialists.
D. none of the above.
E. all of A, B, and C.

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?
68. The common characteristic of multinationals that are organized by function at the upper level
is a narrow:

A. and highly integrated product mix.

B. and highly integrated customer list.
C. variation of prices in the product mix.
D. research and development effort.
E. none of the above

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

69. An organization in which top-level divisions are required to heed input from a staff composed
of experts of another organizational dimension in an attempt to avoid the double-reporting
difficulty of a matrix organization but still mesh two or more dimensions is known as a:

A. hybrid organization.
B. matrix organization.
C. matrix overlay.
D. network corporation.
E. virtual corporation.

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?
70. A structure organized by more than one dimension at the top level is known as a:

A. hybrid organization.
B. matrix organization.
C. matrix overlay.
D. network corporation.
E. virtual corporation.

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

71. A hybrid organization may result from:

A. the firm's acquiring a company with distinct products and distribution channels.
B. management's attempt to mesh product and regional expertise.
C. management's problems with a matrix organization.
D. a firm's use of SBUs.
E. none of the above.

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?
72. The __________ organization has evolved from management's attempt to mesh product and
regional and functional expertise while maintaining clear lines of authority.

A. hybrid
B. matrix
C. global
D. functional
E. network

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

73. Problems with the matrix structure include that:

A. two or more managers must agree on decisions, which can lead to slow decision making.
B. special divisions often must be established to serve heterogeneous customer segments.
C. global branding and production coordination are hindered.
D. all of the above.
E. two of A, B, and C.

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?
74. __________ are organizational forms in which product divisions are defined as though they
were independent businesses.

A. Free-form management units

B. Strategic business companies
C. Strategic business units
D. Matrix overlays
E. Virtual corporations

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

75. Reengineering is:

A. the redesign of the company's products to improve the quality.

B. the significant reduction of middle management.
C. the empowerment of employees.
D. two of the above.
E. all of A, B, and C.

B and C are correct, so D is the appropriate answer.

AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?
76. According to the text, companies are now accepting:

A. two of B, C, and D.
B. the need for frequent reorganization.
C. the need for reducing the size of middle management.
D. the use of pagers and mobile phones for faster communication.
E. all of B, C, and D.

B and C are correct, so A is the appropriate answer.

AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

77. The potential benefits of the virtual corporation concept include that:

A. it permits greater flexibility than is associated with more typical corporate structures.
B. virtual corporations form a network of static relationships that allow them to take advantage
of the competencies of other organizations.
C. this form of organization increases management's control over the corporation's activities.
D. all of the above.
E. two of A, B, and C.

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?
78. The horizontal corporation:

A. often draws teams from different departments to solve a problem or deliver a product.
B. has been characterized as "antiorganization."
C. puts greater decision-making responsibility in the hands of middle managers.
D. all of the above.
E. two of A, B, and C.

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

79. Proponents of the horizontal corporation:

A. claim that lateral relationships inhibit innovation and new-product development.

B. state that this approach to organizing helps to place more decision-making responsibility in
the hands of middle managers and other skilled professionals.
C. claim that it enhances increased control and supervision by upper management.
D. all of the above.
E. two of A, B, and C.

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?
80. Control activities are the efforts to:

A. put plans into effect.

B. learn if plans are working as intended.
C. make corrections.
D. all of the above.
E. two of A, B, and C.

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control

81. Control activities:

A. are the efforts to develop strategic plans for an organization.

B. are needed more by domestic companies than international companies.
C. should be linked to evaluation and reward systems.
D. none of the above.
E. two of A, B, and C.

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control
82. Companies controlled by other companies through ownership of enough voting stock to elect
board-of-director majorities are known as:

A. affiliates.
B. joint ventures.
C. subsidiaries.
D. strategic alliances.
E. two of the above.

A and C are correct, so E is the appropriate response.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control

83. Where are decisions made?

A. IC headquarters
B. Subsidiary headquarters
C. Cooperatively by IC and subsidiary
D. All of the above
E. Two of A, B, and C

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control
84. Some of the variables that determine which decision is made where include:

A. product and equipment.

B. competence of subsidiary.
C. state-of-the-art communication networks.
D. two of the above.
E. all of A, B, and C.

A and B are correct, so D is the appropriate response.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control

85. Decisions to standardize product and equipment with which to make it and to tailor it to fit each
national market are most likely to be made by:

A. IC headquarters.
B. subsidiary headquarters.
C. LDC government officials.
D. none of the above.
E. two of A, B, and C.

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control
86. Reliance on subsidiary management can depend on items such as:

A. two of B, C, and E.
B. how well the executives know one another.
C. IC management understanding host-country conditions.
D. all of B, C, and E.
E. the financial condition of the parent company.

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control

87. In larger, older organizations:

A. more decisions are delegated to the subsidiary headquarters.

B. decisions are delegated to empowered, decentralized subsidiary managers.
C. more decisions are made at headquarters of the parent company.
D. all of the above.
E. two of A, B, and C.

As stated directly in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control

88. A decision to move production factors from one country to another would be:

A. affected by currency and political stability.

B. made cooperatively by subsidiary managers.
C. based on tax, labor supply, and market conditions.
D. all of the above.
E. two of A, B, and C.

A and C are correct, so E is the appropriate response.

AACSB: Analytic
 Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control

89. It is sensible for an IC to direct or allocate as much profit as reasonably possible to

subsidiaries in countries with:

A. two of B, C, and D.
B. the least currency controls.
C. lower taxes.
D. the highest rate of inflation.
E. all of B, C and D.

B and C are correct, so A is the appropriate response.

AACSB: Analytic
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control

90. Price and profit allocation decisions are usually best made:

A. at the subsidiary headquarters.

B. at the IC headquarters.
C. cooperatively by both subsidiary and IC headquarters.
D. at the subsidiary headquarters in the host country with the lowest prices.
E. none of the above.

As stated in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control
91. All the reasons for making decisions at IC headquarters, at subsidiary headquarters, or
cooperatively:

A. do not apply in joint venture situations.

B. apply equally in joint venture situations.
C. apply only to a corporate entity between two or more companies that are foreign to the area
where the joint venture is located.
D. apply only to a corporate entity between an IC and local owners.

As stated in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 10-05 Discuss how an international company can maintain control of a joint venture or of a company in which the intenrational
company owns less than 50 percent of the voting stock.
Topic Area: Control

92. Some methods for the IC to maintain control of less than 50 percent-owned organizations are:

A. all of B, C, and D.
B. a management contract.
C. control of the finances or technology.
D. putting people from the IC in important executive positions.
E. two of B, C, and D.

As stated in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-05 Discuss how an international company can maintain control of a joint venture or of a company in which the intenrational
company owns less than 50 percent of the voting stock.
Topic Area: Control
93. According to the text, the types of information an IC needs to have reported by subsidiaries
include:

A. financial.
B. organizational structure and systems.
C. political.
D. all of the above.
E. two of A, B, and C.

Both A and C are correct, so E is the appropriate response.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control

94. According to the text, the types of information an IC needs to have reported by subsidiaries
include:

A. technological.
B. market opportunities.
C. economic events.
D. all of the above.
E. two of A, B, and C.

As stated in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control
95. The consequence for management in a world out of control is a six-element recipe developed
at Massachusetts Institute of Technology for devising a system of distributed control, which
includes:

A. prepare a clear and integrated plan of action.

B. don't change the simple things.
C. master complex tasks first.
D. all of the above.
E. two of A, B and C.

As stated in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control

Essay Questions
96. What is organizational design, and why is it an important topic for managers of international
companies to understand?

Answers may vary but should include such points as the following: Organizational design is a
process that deals with how an international business should be organized in order to ensure
that its worldwide business activities are able to be integrated in an efficient and effective
manner. It is essential that the structures and systems being implemented are not merely
consistent with each other but also consistent with the environmental context in which the
organization is operating and the strategy the company is using for competing in this
international environment. The size of the organization and the complexity of its business
operations must also be considered in the design of a company.
The structure of an international company (IC) must be able to evolve over time, to allow the
organization to respond to change and to efficiently and effectively reconfigure the way in
which its competencies and resources are integrated within and across the IC's various units.
This is a major challenge for ICs, especially as their activities are increasingly dispersed
across the globe as well as subject to rapid and ongoing environmental and strategic change.
Failure to successfully deal with this challenge threatens the IC's performance and, indeed, its
long-term survival.
The IC's strategic planning process itself, because it encompasses an analysis of the firm's
external environments as well as its strengths and weaknesses, often discloses a need to alter
the organization. Changes in an IC's strategy may require changes in the organization, but the
reverse is also true. For instance, a new CEO may join the firm, or the IC may acquire a
company in another nation or in another area of business activity. Strategic planning and
organizing are so closely related that usually management treats the structure of the
organization as an integral part of the strategic planning process.

Feedback: As stated in the text.

Refer To: Figure 10.1, The relationship among international environment, competitive strategy,
and organizational structure

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-01 Explain why the design of organizational structure is important to international companies.
Topic Area: What is organizational design, and why is it important for international companies?
97. What are the four primary dimensions that need to be considered when designing the
structure of an international company, and why are they important?

The four primary dimensions that need to be considered when designing the structure of an IC
are (1) product and technical expertise regarding the different businesses that the company
participates in, (2) geographic expertise regarding the countries and regions in which the
company operates, (3) customer expertise regarding the similarity of client groups, industries,
market segments, or population groups that transcend the boundaries of individual countries
or regions, and (4) functional expertise regarding the various value chain activities that the
company is involved with.
For the why part of the question, answers may vary but might include the following: ICs vary
with respect to the way these four dimensions are structured and integrated. No single
structure is best for all companies and contexts. Rather, managers have to consider the nature
of their company's international operating environment and strategy—both currently and how
they are expected to change in the future—when deciding when and how to modify the IC's
organizational structure.

Feedback: As stated in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-02 Discuss the organizational dimensions that must be considered when selecting organizational structures.
Topic Area: What is organizational design, and why is it important for international companies?

98. Describe the global product form, explain why a company might adopt this form, and identify
the disadvantages of this structure.

Answers may vary, but may include the following points: Product divisions are responsible for
the worldwide operations such as marketing and production of products under their control.
Frequently, this structure represents a return to pre-export department times in that the
domestic product division has been given responsibility for global line and staff operations.
Each division generally has regional experts, so while this organizational form avoids the
duplication of product experts common in a company with an international division, it creates a
duplication of area experts. Occasionally, to avoid placing regional specialists in each product
division, management will have a group of managerial specialists in an international division
who advise the product divisions but have no authority over them.

Feedback: As stated in the text.

Refer To: Figure 10.4, Global corporate form—product

AACSB: Analytic
 Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-03 Discuss the various organizational forms available for structuring international companies.
Topic Area: What is organizational design, and why is it important for international companies?

99. Explain why and where decisions are made among ICs and their subsidiary units.

Answers may vary but may include the following points: Theoretically, all decisions could be
made either at the international company (IC) headquarters or at the subsidiary level. As
common sense would indicate, they are not; instead, some decisions are made at
headquarters, some are made at subsidiaries, and some are made cooperatively. Many
variables determine which decision is made where. Some of the more significant variables are
(1) product and equipment, (2) the competence of subsidiary management and reliance on
that management by the IC headquarters, (3) the size of the IC and how long it has been one,
(4) the detriment of a subsidiary for the benefit of the enterprise, and (5) subsidiary frustration.

Feedback: As stated in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-04 Explain why decisions aremade where they are among parent and subsidiary units of an international company.
Topic Area: Control
100. What are the types of information that an international company needs to have reported to it
by its units around the world, and why is each type important for the IC and its control efforts?

Answers may vary but may include the following points: For controls to be effective, all
operating units of an IC must provide headquarters with timely, accurate, and complete
reports. There are many uses for the information reported. Among the types of reporting
required are (1) financial, (2) technological, (3) market opportunity, and (4) political and
economic.
Financial: A surplus of funds in one subsidiary should perhaps be retained there for
investment or contingencies. On the other hand, such a surplus might be more useful at the
parent company, in which case payment of a dividend is indicated. Or perhaps another
subsidiary or affiliate needs capital, and the surplus could be lent or invested there. Obviously,
parent headquarters must know the existence and size of a surplus to determine its best use.
Technological: New technology should be reported. New technology is constantly being
developed in different countries, and the subsidiary or affiliated company operating in such a
country is likely to learn about it before IC headquarters hundreds or thousands of miles away
does. If headquarters finds the new technology potentially valuable, it can gain competitive
advantage by being the first to contact the developer for a license to use it.
Market opportunities: The affiliates in various countries may spot new or growing markets for
some product of the enterprise. This could be profitable all around, as the IC sells more of the
product while the affiliate earns sales commissions. Of course, if the new market is sufficiently
large, the affiliate may begin to assemble or produce the product under license from the parent
company or from another affiliate. Other market-related information that should be reported to
IC headquarters includes competitors' activities, price developments, and new products of
potential interest to the IC group. Also of importance is information on the subsidiary's market
share and whether it is growing or shrinking, together with explanations.
Political and economic: Not surprisingly, reports on political and economic conditions have
multiplied mightily in number and importance as revolutions—some bloody—have toppled and
changed governments. Democracies have replaced dictatorships, one dictator has replaced
another, countries have broken apart or reunited—changes have been occurring on almost
every continent.

Feedback: As stated in the text.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10-06 List the types of information an international company needs to have reported to it by its units around the world.
Topic Area: Control